explain plzHomework Answers
1)
Answer: (B)
The indirect impact of exchange rate appreciation, leads to fall in the domestic goods prices by increasing the import competition. thus, it eventually leads to fall in the average price level in economy. Domestic poducers are compelled to reduce the price in face of cheap imported goods.
Thus indirect impacts reinforce the direct impact.
2)
Answer: (C)
inflation rate is high, thus bank will sell bond to reduce the inflation by raising the interest rate. Fall in the inflation rate would also cause the appreciation of currency in the market. Fall in the inflation is right for appreciation of currency.
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